The Re-alignment of Retail

It happens to every industry eventually, whether it's agriculture, automotive, manufacturing or retail. Shifts in demographics and buying patterns, the availability of automation techniques, and more recently, the growing impact of ecommerce bring about massive re-alignments which disrupt the economy. These patterns are nothing new, and the most recent industry to see such massive re-alignment is retail.

Make no mistake, it's not, as pundits claim, a "retail apocalypse." Retail is alive and well, consumers continue buying things, and retailers continue selling them. What's different is how and where those things are being sold.

The re-alignment of the retail industry is occurring in four areas: the growing influence of ecommerce, automation and smart store technology, a shift away from cookie-cutter malls and superstores, and the dominance of online-only retailers like Amazon. Those four areas are not, as some may proclaim, the Four Horsemen of the Retail Apocalypse. Rather, they are simply part of a necessary and inevitable re-alignment in an industry that continues to grow.

The growing influence of ecommerce

Retailer strategy at one time depended on a constant growth in new store openings and a heavy presence in shopping malls throughout the country, but that exclusive brick-and-mortar focus is no longer viable in a world where consumers want to shop from their smartphones. Sears, once the mainstay of shopping malls throughout the country, made the mistake of thinking that their strategy, which consisted mainly of being a shopping mall anchor, would continue to be valid – yet the company may not survive the year.

The company's online strategy was practically nonexistent, and the biggest mistake this retailer and others made was to see the online channel as secondary to the all-powerful brick and mortar mall store. Those retailers who are enjoying success see online as equal to brick-and-mortar, and place just as much emphasis and development money into building a sophisticated online channel.

Some prominent retailers have embraced a different type of strategy – creating a physical shop with a unique offering, while also building a strong online presence. Stadium Goods, a premium sneaker and streetwear marketplace with two locations in Manhattan, has created such a strategy. A veritable temple to sneakers, Stadium Goods is home to the type of high-end sneakers such as Kanye West's hard to find Yeezy's, that you can't find at the cookie-cutter mall stores – and while the shop has created an incredible in-store experience, along with videos of popular rap stars shopping in the store – the online experience also serves the customer, giving shoe shoppers outside of Manhattan a look at some of the latest hard-to-find designs.

Automation and smart store technology

The Amazon Go store, a fully automated grocery store, has been in pilot stage and open only to Amazon employees until this week, when Amazon will open the checkout-free shopping experience to the public. Shoppers simply scan their smartphone app as they walk in, pick up what they want, and walk out.

Kroger's new Scan, Bag, Go service, which the grocer expects to offer in 400 stores this year, doesn't go quite as far as Amazon, but it's on the same path. The app lets shoppers scan items with their smartphone or a hand-held scanner as they place them in the cart, and then pay when they're done just by scanning the app at a self-checkout station.

By comparison, specialized stores serving a very specific niche audience succeed by heightening the personal customer experience with live, human staff – for example, Stadium Goods is frequently the subject of the popular "Sneaker Shopping" YouTube channel, where celebrity shoppers (such as Ski Mask The Slump God) are seen enjoying the buying experience.

The re-alignment will not involve wide-spread full automation and massive elimination of retail jobs, rather, it will be about striking a balance between automation and customer service, and using those automation tools to enhance – rather than replace – the human customer experience. "When you go into a store, there is a certain expectation that there is going to be personalized service, and that there is going to be someone to talk to," said Michael Witty, Director, Retail/CPG Digital Practice at ISG, a global technology research and advisory firm. "The question is, how automated can automated be? There is a balance between the millennial generation who are really comfortable ordering online and with self-service apps, and those who prefer to go into stores and touch and feel the product, and speak to a person and what the alternatives are. The majority of purchases still happen through personal interaction in a store at one level or another."

Cookie-cutter malls and superstores

Large shopping malls, anchored by major retailers, are not as popular as they once were, and consumers have grown weary of seeing identical malls with identical stores in every town. The bloom is off the rose, and the era of the cookie-cutter shopping mall and superstore is drawing to a close.

What consumers expect in a shopping experience has always been a moving target. Shopping malls are past their peak, and consumers have grown bored with them. According to Witty, " The feel is the same wherever you go. "If you go back and look at what happened twenty years ago, there was a huge buildup of retail, and lots of malls built in suburbia and lots of strip malls in rural areas. There was an oversaturation in the market given today's demographics and where today's spendable income is. There is two kind of pressures, overcapacity in cookie-cutter malls and less foot traffic, and closings of those stores which can't differentiate themselves and provide a real experience or the customers – they are caught in the shutdowns."

Today's retail re-alignment may be bad news for retailers who haven't been paying attention. Shopping malls with the same shops, same food court and same look and feel are as out of date as shoulder pads and mullet hairstyles, and consumers want something new. What's more, they want automation, but only up to a point, and they don't want automation simply for automation's sake in an environment which completely upends the personal customer experience. The future of retail will look very different in ten years, but it will be better, more personalized, and more convenient than ever.

Dan Blacharski is an IT thought leader, advisor, industry observer and editor of "NewsOrg.org. He has been widely published on subjects relating to customer-facing technology, fintech, cloud computing and crowdsourcing. He lives in South Bend, Indiana with his wife Charoenkwan and their Boston Terrier, "Ling Ba." Follow @Dan_Blacharski

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